I. & M. Smith (Pty) Ltd. since 1915
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I. & M. Smith (Pty) Ltd.

Coffee Market Report

24 Feb 2016
The coffee markets encountered another day of negative pressure yesterday, with their inability to follow the previous day’s rally in New York and break out of the presently soft trading range. Thus it remains business as usual and with the consumer market industries relatively well covered and stepping back to take advantage of fill in opportunities, with the producers mostly showing some degree of price resistance and trying to add value to the soft price dictates of the coffee terminal markets. Thus it remains for the present in terms of the physical coffee market, times of lacklustre and slow trade.

These factors of a somewhat complacent physical coffee market aside the coffee markets were devoid of any striking news yesterday and one might only comment that in terms of no news is good news, which underlines the fact that for the present there is more than enough coffee supply available for the short to medium term. As one has to presume that if any of the leading producer blocs had anything in the way of scare stories to forward to try to support the soft coffee markets, this would most certainly be coming to fore and quite aggressively so.

Meanwhile the Brazil governments Crop Supply Agency and with aggressive selling by the farmers and coffee cooperatives off their once substantial stocks and against two years of deficit crops and now with much depleted stocks, continue to try to steadily sell off their aged coffee retention stocks. In this respect and focused on their price sensitive domestic markets coffee roasters, they a due to offer on auction tomorrow 188,000 bags of these arabica coffee stocks.

An interesting development in terms of the surging market share of coffee capsule machines and capsules within the mainstream consumer markets and even with producer markets such as Brazil is the news that the City of Hamburg has announced a ban on these capsules within their City offices, which is particularly interesting in terms of the historical prominence of this city in terms of coffee trade. The focus being on the environmental issue of high volumes of waste that is created by the capsules that are made out of plastic and or foil, which the city officials would like to limit.

The May on May contracts arbitrage between the London and New York markets narrowed yesterday, to register this at 55.88 usc/Lb., while this equates to a 46.86% price discount for the London robusta coffee market. This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, with the good discount most likely due to remain in place for the foreseeable future, in line with steady robusta shipments out of Vietnam.

The Certified washed Arabica coffee stocks held against the New York exchange were seen to decrease by 333 bags yesterday; to register these stocks at 1,560,901 bags. There was meanwhile no change to the number of bags pending grading for this exchange; to register these pending grading stocks at 5,689 bags.

The commodity markets were mixed in trade yesterday and with the lack of progress in the negotiations to support Oil prices coming to the fore to dampen spirits within this influential sector of the markets, but despite the negative effects of some U.S. dollar buoyancy the overall macro commodity index nevertheless took a relatively steady track. The Sugar, Cocoa, Orange Juice, Gold, Silver and Platinum markets had a day of buoyancy and the Cotton and Copper markets were relatively steady, while the Oil, Natural Gas, Coffee, Wheat, Corn and Soybean markets tended softer for the day. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.13% higher; to see this Index registered at 367.63. The day starts with the U.S. Dollar steady in early trade and trading at 1.398 to Sterling and 1.102 to the Euro, while North Sea Oil is tending softer in early trade and is selling at 31.45 per barrel.

The London and New York markets had a soft of par start for the day yesterday and maintained this track into the afternoon and taking an erratic sideways negative path, as the afternoon progressed. There was no excitement or change to the negative nature of the markets for the rest of the day’s trade and with both markets tending softer as the day progressed, towards an overall soft close. The London market ended the day on a soft note and with 75% of the earlier losses of the day intact, while the New York market likewise ended the day on a soft note and with 87% of the earlier losses of the day intact. One can expect little inspiration from this close and perhaps little better than a steady to soft start for early trade today against the prices set yesterday, as follows:

LONDON ROBUSTA US$/MT            NEW YORK ARABICA USc/Lb.

MAR 1362 – 18                                      MAR 117.80 – 2.05
MAY 1397 – 21                                      MAY 119.25 – 1.35
JUL 1427 – 20                                           JUL 121.00 – 1.30
SEP 1453 – 19                                           SEP 122.50 – 1.35
NOV 1475 – 18                                        DEC 124.30 – 1.25
JAN 1497 – 18                                         MAR 126.15 – 1.25
MAR 1517 – 18                                       MAY 127.30 – 1.20
MAY 1538 – 18                                          JUL 128.30 – 1.20
JUL 1558 – 18                                            SEP 129.25 – 1.20
SEP 1586 – 18                                           DEC 130.55 – 1.10